In a significant move, the DOJ filed a “statement of interest” in federal court this week, siding with hundreds of physicians who accuse top insurers and a firm formerly known as MultiPlan — now rebranded as Claritev — of conspiring to fix prices for out-of-network care.
The DOJ’s involvement doesn’t just add legal firepower. It sends a signal that this case matters. More importantly, it casts a harsh spotlight on how major insurers including UnitedHealthcare, Aetna, Cigna and Elevance may have skirted antitrust laws through a so-called “third-party intermediary” — and whether Wall Street has been too confident in the impunity these corporations usually enjoy.
According to reports, the DOJ rebuffed Claritev’s argument that there was no price-fixing conspiracy simply because insurers may use the company’s algorithm differently. The Sherman Antitrust Act, the DOJ pointed out, is clear: even setting a “starting point” for prices — if done in coordination — can be anti-competitive. And sharing sensitive pricing data through a middleman? That’s also potentially illegal.
As someone who spent years inside the health insurance industry, I can tell you that what’s at stake here is nothing short of enormous. If this lawsuit proceeds, we might finally get a clearer picture of how these corporations — working together under the cover of a “neutral” analytics firm — manipulated payment rates to increase profits, all while starving frontline health care providers.
Claritev and its insurer partners, of course, deny the allegations and have moved to dismiss the case. But the DOJ’s filing now stands in their way.
Some history: The backstory adds even more weight to the DOJ’s action. In 2023, a New York Times investigation uncovered how Claritev (then MultiPlan) operated under a perverse incentive: the more it “saved” insurers and their corporate clients by underpaying doctors, the bigger the cut Claritev and insurers took for themselves. That same year, Senator Amy Klobuchar called on federal regulators to investigate what she and many providers viewed as algorithm-enabled price-fixing. She even introduced legislation to stop corporations from using AI tools to coordinate pricing.
The DOJ statement of interest comes just weeks after the agency launched an investigation into UnitedHealth Group’s Medicare billing practices. As the Wall Street Journal reported, the DOJ “is examining the company’s practices for recording diagnoses that trigger extra payments to its Medicare Advantage plans, including at physician groups the insurance giant owns.”
For years, insurers have been able to hide behind complex data systems, AI algorithms and opaque contracting practices to squeeze providers — and boost profits. Investors have generally assumed that neither Congress nor federal regulators would seriously challenge that model.
But this latest move by the DOJ suggests otherwise. Maybe — just maybe — the Trump Administration will be tougher on insurers than investors expected. And if that is true, it would be a long-overdue course correction – for doctors, patients and taxpayers.
[Note: This post was originally published on Wendell Potter’s Substack, HEALTH CARE un-covered.]
At a recent Congressional hearing in Washington, Rep. Mark Takano (D-California), the top Democrat on the House Veterans Affairs Committee, directed a series of questions to the CEO of the health care company Optum, a wholly owned subsidiary of UnitedHeath Group. The exchange helped expose an alarming and growing problem in veterans’ health care in this country: massive overbilling by large, for-profit insurance conglomerates.
Takano’s questioning was a master class, and you should watch it. You can see a taste of it here.
What Rep. Takano exposed is that massive health care companies are enriching themselves at the expense of our nation’s Veterans.
At issue is the Veterans’ Community Care Program, which facilitates medical care for veterans provided by health care professionals outside of the Veterans Health Administration (VHA).
The program is administered by big health insurance companies, including Optum and TriWest. Data compiled by federal investigators shows that these insurers, often called third-party administrators (TPAs), overbill the government in a similar way that insurers selling Medicare Advantage plans do, as HEALTH CARE uncoveredhas reported.
Department of Veterans Affairs Office of the Inspector General (OIG) February 2025 report.
The investigators looked under the hood of these companies and found some real troubling signs.Their February 2025 report – published by the Department of Veterans Affairs Office of the Inspector General (OIG) – found that the VHA overpaid its TPAs by more than $1 billion between 2020 and 2024.
The largest recipient was UnitedHealth Group’s Optum, which received overpayments of more than $105 million from 2020 to 2022. TriWest was overpaid $73.4 million from 2020 to 2023. The OIG found the overpayments were a result of the companies charging the VHA incorrect rates.
For example, Optum reportedly overcharged the VHA by $783.4 million between 2020 and May 2024 for dental services provided by community care providers. Investigators said Optum was able to charge the extra amount because of a technicality in the contract: there was no language that specifically prevented Optum from charging the VHA more than it was reimbursing the community care provider for the service.
It turns out this is not a new problem. An OIG report from 2021 found that providers providing care for veterans through the Community Care Program billed for higher paying evaluation and management services codes at much higher rates than other doctors in the same specialty. That’s evidence of upcoding. The report also found that providers were potentially double billing for services provided by entering additional codes already covered by a global surgery code. These additional codes cost the VA $59.6 million from between 2020 and 2022.
Kudos to Rep. Takano for raising this important issue and his efforts to protect the integrity and solvency of the VA program and hold the insurance companies accountable.
[Editor’s note: I am reposting this piece because it brilliantly exposes how the drug middlemen “PBMs,” who are supposed to be delivering value to Americans, deliver value primarily to themselves and the insurers they work for. They push opioids to vulnerable Americans without prior authorization because they make hundreds of millions of dollars doing so, even when they know that these opioids are killing people.]
A recent Barron’s exposé detailing pharmacy benefit managers’ (PBMs) backroom dealings in the opioid crisis should be read by everyone. PBMs, which most Americans encounter only indirectly through their health insurance plans, have quietly amassed enormous power over which medications we have access to — and how much they cost. This power extends not only to routine prescriptions but also, as it turns out, to some of the most devastating public health crises of our time.
The report reveals that the largest PBMs — CVS Caremark, UnitedHealth’s Optum Rx, and Cigna’s Express Scripts — were heavily involved in the distribution of OxyContin, a drug at the center of the opioid epidemic. Between 2016 and 2017, these companies raked in more than $400 million in fees and rebates from Purdue Pharma, OxyContin’s manufacturer. That these rebates were essentially tied to the volume of opioids sold is not just alarming — it’s emblematic of how these middlemen prioritize profit over public health.
The role of PBMs in drug pricing and availability has been contentious for years. The middlemen argue that their rebate system helps lower costs for employers and insurance plans, but this claim often falls apart under scrutiny. As Barron’s found, PBMs received as much as 19.75% in rebates from OxyContin sales, depending on the dosage and the number of pills prescribed. The higher the dosage, the bigger the rebate and profits. This system, which rewards higher utilization of a dangerous opioid, contradicts the PBMs’ – like CVS Caremark’s – own professed claims of fighting opioid abuse.
For years, PBMs have presented themselves as crucial gatekeepers, using their clout to negotiate lower drug prices. But the reality, as the article highlights, is far murkier. PBMs, including CVS Caremark and Express Scripts, claim they pass the majority of rebates back to their clients — figures as high as 99%. Yet, these rebates are negotiated in secret, and consumers rarely see the benefits. The rebates often serve to maintain PBMs’ relationships with drugmakers, who want to secure prime placement on formularies — the list of drugs an insurance plan covers.
The opioid crisis, as Barron’s demonstrates, could be a chilling preview of how PBM-driven rebate schemes might contribute to other drug pricing scandals. If PBMs have been willing to accept massive rebates from Purdue Pharma in exchange for keeping OxyContin widely available during a deadly opioid epidemic, what other drugs have been pushed to the forefront based on financial incentives rather than medical necessity or effectiveness?
The documents that Barron’s obtained, many of which were previously confidential, show that PBMs had ample opportunity to stem the tide of opioid overprescribing. They could have placed stricter limitations on OxyContin or required prior authorization (which they make significant use of for medically necessary medications) to ensure that the drug was being prescribed appropriately. Instead, they allowed Purdue to maintain a stronghold on the market. According to memos, PBMs even demanded higher rebates as the opioid epidemic worsened.
As the article suggests, this isn’t merely a historical issue. The opioid crisis may have peaked in the late 2010s, but its effects are still being felt today. And the practices of PBMs — opaque rebate deals, backroom negotiations and a relentless focus on profit — are still very much in place. While Purdue Pharma and its executives have been held accountable through legal settlements, PBMs have largely escaped similar consequences. The lawsuits against PBMs for their role in the opioid crisis are still ongoing, and CVS Caremark’s $5 billion settlement, finalized last year, didn’t even require an admission of wrongdoing.
This begs a larger question about the pharmaceutical supply chain as a whole. If PBMs have the power to negotiate how drugs like OxyContin are covered, and if their decisions are driven by maximizing profits through rebates, can they really claim to be stewards of affordable health care? (Regular readers of this newsletter should roll their eyes at that question.)
For too long, PBMs have operated with little transparency. As the Barron’s investigation shows, this secrecy has allowed them to profit handsomely from one of the deadliest public health crises in U.S. history. The opioid crisis could be the most egregious example of PBM malfeasance, but it’s far from the only one. As long as PBMs continue to operate without appropriate oversight, the American public will remain vulnerable to their influence over drug prices — and, by extension, their health.
Project 2025 proposes to make private Medicare plans, also known as Medicare Advantage (MA) plans, the default enrollment option for beneficiaries. Similar to Trump-era programs that automatically enrolled beneficiaries in privatized Medicare programs known as Direct Contracting Entities, Project 2025 would shuttle seniors and people with disabilities into private Medicare very quickly.
Given the importance of Medicare to the overall health and well-being of the people of the United States, it’s important to understand how this forced migration of almost all beneficiaries into privatized Medicare Advantage plans would affect the future of the program. Extrapolating upon the projections of the Medicare Trustees based on the current flux of people in Medicare and Medicare Advantage, shifting 100% of beneficiaries into Medicare Advantage would bankrupt the Hospital Insurance Trust Fund within 5 years.
Though MA was originally cast as a cost-saver, the Medicare Payment Advisory Commission found that payments to MA insurers are 22% higherthan they are for similar patients in traditional Medicare. Unfortunately, this higher spending does not lead to better health outcomes; it just results in billions of dollars in profits for Big Insurance. The higher cost of MA compared to traditional Medicare means that carrying the strategy of Project 2025 to its possible endgame, if all Medicare beneficiaries are compulsorily enrolled in a private plan, the Medicare Trust Fund will immediately go into deficit spending. By 2030 the Medicare Hospital Trust Fund would run out of funds and become insolvent, disrupting the health care of more than 60 million seniors and people with disabilities unless Congress intervened in ways the authors of Project 2025 didn’t bother to call out. Ten years of Project 2025’s policy of all beneficiaries being in MA plans would cost taxpayers an additional $1.5 trillion.
And all for providing care that is not on par with traditional Medicare.
Instead of improving Medicare, an overwhelmingly popular program, Project 2025, would dismantle the program quicker than many even thought possible. In a post-solvency world, Medicare would either become a fully privatized system, turning beneficiaries into revenue generators for earnings reports to Wall Street, or require hefty increases in deductibles, premiums, copays, and taxes. Either way, the result would be little to no health coverage for our most vulnerable communities, and worse care for everyone.
Medicare turns 60 next year. The implementation of Project 2025’s health care agenda would leave the program careening toward full privatization. A more prudent approach would be to stop the $140 billion in overpayments to Medicare Advantage insurers each year and use the savings to improve the traditional Medicare program. Instead of sending those billions to insurance corporation shareholders, use it to expand coverage in traditional Medicare to include dental, vision and hearing care and establish an out-of-pocket cap that our seniors and disabled citizens can afford.
The Commonwealth Fund this week released its biennial ranking of the health systems of 10 of the world’s richest countries, and once again the United States comes in dead last – as it has for the past 20 years – not just overall but on most performance measures, especially access and affordability.
Throughout the report, it’s clear that one of the reasons the U.S. always brings up the rear internationally is the fact that far too many Americans – including those of us with health insurance – can’t afford to get the care we need. And tragically, so many of us who do seek care – with or without insurance – wind up deep in debt. As the Commonwealth Fund reports over the years have shown, that is a uniquely American tragedy.
As KFF News has reported, more than 100 million Americans – 41% of adults – are mired in medical debt, and the vast majority of those people have both jobs and health insurance. The problem is that their “coverage” is just not nearly sufficient because of the ever-increasing out-of-pocket demands big insurance conglomerates (and the employers that hire them to administer health care benefits) saddle us with to boost their profits. (We’re the only country that allows for-profit insurance companies to run its health care system.)
As the Commonwealth Fund’s report shows, we spend around twice as much for health care as the average of the other nine countries and almost twice as much as a percentage of GDP, yet we are the only one of the bunch that has not achieved universal coverage.
Despite the big gains in coverage we’ve made since the enactment of the Affordable Care Act, more than 26 million of us remain uninsured. But just as unacceptable is the fact that far more than that – one of every four working adults in this country – are underinsured because of the uniquely American high-deductible plans that our employers and insurers have forced us into. For many of us they are not just high, they are sky-high. Forbes magazine has called people in such plans functionally uninsured.
The Commonwealth Fund’s researchers note that unaffordable cost-sharing requirements – deductibles, copays and coinsurance obligations – “render many patients unable to visit a doctor when medical issues arise, causing them to skip medical tests, treatments, or follow-up visits, and avoid filling prescriptions or skip doses of their medications.” And when they do get the tests, treatments and medications they need, they all too often find themselves buried in debt.
It has become such a problem that the Biden-Harris administration has made alleviating medical debt a priority. The White House is expected to lay out at least some of the steps the federal government can take to do that in the coming weeks.
One important thing the administration already has done is ask Congress to pass legislation that would cap out-of-pocket costs for prescription drugs at $2,000 a year – and make sure that cap applies to all of us – not just Medicare beneficiaries. A $2,000 cap for people enrolled in Medicare Part D (and the private replacement plans marketed as Medicare Advantage) will go into effect in January.
The Center for Health and Democracy put together these facts illustrating the high cost we pay for Medicare Advantage, both financially and physically. In Medicare Advantage, our taxpayer dollars are not covering medically necessary care, as required, but rather end up in the pockets of corporate shareholders and executives. Consequently, the health and well-being of Medicare Advantage enrollees is at risk and thousands of enrollees die needlessly each year, according to one NBER report.
Revenue generated by UnitedHealth from taxpayer dollars in the Medicare
Advantage and Medicaid program: $160 billion
Number of prior authorizations Medicare Advantage plans required in 2022: 46
million
Amount that Big Insurance overcharges the government by in the Medicare
Advantage program each year: $140 billion
Probability of dying after pancreatic cancer surgery with Medicare Advantage
compared to with Traditional Medicare: 1.9 times more likely
Probability of dying after gastrointestinal cancer surgery with Medicare
Advantage compared to with Traditional Medicare: 1.4 times more likely
Probability of dying after liver cancer surgery with Medicare Advantage
compared to with Traditional Medicare: 1.4 times more likely
Profits raked in by Big Insurance, which run Medicare Advantage plans: $71
billion
Compensation of the highest paid Big Insurance CEO in 2023: $22.1 million
Percentage of Medicare Advantage plans requiring prior authorization for acute
hospital stays: 98 percent
Percentage of times Traditional Medicare requires prior authorization for acute
hospital stays: 0 percent
Percentage of Medicare Advantage plans requiring Step Therapy for medications
covered under Part B: 46 percent
Number of times Traditional Medicare requires Step Therapy before covering the drug
prescribed by your doctor: Never
The big for-profit insurers made more than $40 billion in profits during the first six months of this year but Wall Street doesn’t consider that nearly enough. Investors have been shifting money away from those companies, which, I can assure you, has set off alarm bells in the C-Suite.
Because top executives’ compensation is tied to meeting specific financial metrics, including shareholders’ return on investment, the CEOs are especially motivated to right the ship and reduce the percentage of revenues their companies pay out in claims to provider groups and facilities the companies don’t own. You can be certain they’ll be pulling all the levers they can think of.
I would be surprised if some of them haven’t already called in McKinsey & Co. or another big consulting firm to look under the hood. (When I worked in the industry, the chief financial officer of one of my employers had McKinsey on a $50,000-a-month retainer.) But with the stock price falling at all of the companies while the Dow and other Wall Street indices are humming along, the consultants will be called in for a special assignment beyond any retainer. They’ll do a deep dive into the companies’ operating and staff divisions and develop recommendations to “streamline” operations, cut expenses and reallocate resources.
Here are some things to expect in the coming weeks and months at these companies:
Increased hardball with hospital systems: As I’ve reported, Elevance/Anthem, which owns several for-profit Blue Cross plans around the country, is in a protracted dispute with Bon Secours Mercy Health, a hospital system in Ohio and Virginia, over Medicaid and Medicare Advantage reimbursements. Earlier this month, BSMH sued Elevance/Anthem for $93 million in unpaid and disputed claims. The suit claims that Elevance/Anthem’s audits are a “bad faith attempt to bludgeon BSMH Virginia into submission in the contract negotiations, as opposed to a good faith exercise of Anthem’s discretion.”
Take it or leave it pay cuts to doctors: Just as the pandemic was reaching the United States in early 2020, UnitedHealth Group sent letters to numerous physician groups demanding pay cuts of up to 60%. If the doctors — many of whom were on the front lines trying to keep Covid patients alive — refused, they’d be kicked out of UnitedHealth’s provider network. UnitedHealth rescinded or postponed some of those planned cuts temporarily, but physicians should expect to see those demands again from big insurers.
Layoffs: I know from personal experience that when McKinsey shows up, layoffs are almost always inevitable. Job security for many employees goes out the window. I had to lay off members of my own staff over the years because of the “restructurings” and downsizing McKinsey recommended.
Sure enough, late last month, CVS/Aetna told regulators in eight states that it would eliminate about 5,000 position — even as the company made additional acquisitions, including paying $8 billion for Signify Health, a nationwide network of 10,000 clinicians, and $10 billion for Oak Street Health, a primary care company.
Divestitures: Speaking of CVS/Aetna, I’ve seen reports that investors are questioning the company’s “transformation” efforts, especially in light of the fact that the company’s shares have been down more than 25% since the first of the year. When Wall Street financial analysts signal dissatisfaction with the performance of a company’s operating divisions, the CEO and other executives will assess which operations have become a drain on earnings or are not working synergistically with other and more profitable divisions.
Big insurers are like chameleons, constantly recasting themselves based on Wall Street’s whims. When I joined Cigna in 1993, the company was a large multi-line insurer with a property and casualty division, an individual insurance business, a reinsurance division and a financial services company. Aetna had similar lines of business back then. Both companies shed those operations at the behest of investors and analysts to focus exclusively on health care.
Exiting some Obamacare markets: When the Affordable Care Act marketplaces became active in 2014, most insurers rushed in, and many, the big ones in particular, quickly rushed out. They couldn’t make enough money fast enough to satisfy Wall Street. Since then, the government has increased subsidies (at least temporarily) to help people afford their premiums and out-of-pocket obligations, and many insurers, smelling higher profits, have returned. However, this marketplace can be volatile. Cigna announced last month it is exiting some of the Obamacare markets it had recently entered.
Redoubled efforts to enroll more seniors into Medicare Advantage: Insurers have learned that the federal government is a much more generous customer than the nation’s employers, who once were the primary source of insurers’ revenues and profits. When looking at 2021 data, Kaiser Family Foundation researchers found that “Medicare Advantage insurers reported gross margins averaging $1,730 per enrollee, at least double the margins reported by insurers in the individual/non-group market ($745), the fully insured group/employer market ($689), and the Medicaid managed care market ($768).
Purging customers: The Affordable Care Act makes it illegal for insurers to refuse to sell coverage to people with pre-existing conditions or to charge them more based on their health, but it doesn’t stop them from making premiums unaffordable. Insurers learned long ago that a way to drive away unprofitable individual and small-business customers is to jack up the rates so high those customers will leave. This is known as purging in the health-insurance business. Cigna and other insurers are planning double-digit premium increases for many of those customers in 2024 to boost profits. Cigna’s chief financial officer told investors last month that, “We are likely to have fewer customers in the individual exchange business in 2024 relative to where we are in 2023.” Getting rid of some of those people, he said, should increase the company’s profit margin.
Aggressive use of prior authorization: Federal investigators found in July that some of the big insurers make much more aggressive use of prior authorization in Medicare Advantage and Medicaid than in their commercial health plans, meaning they are refusing to cover the cost of care for many seniors and low-income Americans to boost profits. Doctors have complained for years that insurers are increasingly refusing to pay for care their patients need, regardless of plan type. In the face of congressional scrutiny, Cigna, UnitedHealth and some other companies recently announced they will reduce the number of treatments requiring advanced approval, but don’t be surprised if that applies to a small percentage of patients — and primarily patients receiving care from doctors they employ or who work in clinics and other facilities the insurers own.
Benefit buydowns: An age-old trick insurers have used for decades to improve profit margins is to reduce the value of their health benefit plans while they also increase premiums. Behind closed doors, this is called “benefit buydown.” It manifests in many ways, including making health-plan enrollees pay more out of their own pockets before the coverage kicks in, removing doctors and hospitals from their provider networks, increasing prior-authorization requirements, and refusing to pay claims after medical care has been provided. Cigna reportedly used a software program to reject more than 300,000 requests for payment over two months in 2022. Lawyers in California have filed a class-action lawsuit against the company, claiming it uses an algorithm to deny claims en masse and without human review.
Increase in inter-company eliminations: The ACA requires insurers to pay 80-85% of revenues on patient care. If they spend less than that, they have to send rebate checks to their customers. But the big companies that have moved swiftly into health care delivery have found they can circumvent that requirement — and congressional intent — by paying themselves. The ACA requirement doesn’t apply to health care providers, so UnitedHealth, Cigna and CVS/Aetna in particular are steering their health-plan enrollees to care delivery entities they own. UnitedHealth, which employs more than 70,000 doctors, is clearly the pack leader. During the first half of this year, UnitedHealth categorized $66 billion as “eliminations.” That amounted to 25% of total revenues.
Bottom line: Expect to pay more for your health insurance AND your health care next year — if you can get it at all — to make Wall Street financial analysts and investors (including those in the C-Suite) a little happier and richer.
Big Insurance revenues and profits have increased by 300% and 287% respectively since 2012 due to explosive growth in the companies’ pharmacy benefit management (PBM) businesses and the Medicare replacement plans they call Medicare Advantage.
The for-profits now control more than 80% of the national [Pharmaceutical Benefits Manager] PBM market and more than 70% of the Medicare Advantage market.
In 2022, Big Insurance revenues reached $1.25 trillion and profits soared to $69.3 billion.
That’s a 300% increase in revenue and a 287% increase in profits from 2012, when revenue was $412.9 billion and profits were $24 billion.
Big insurers’ revenues have grown dramatically over the past decade, the result of consolidation in the PBM business and taxpayer-supported Medicare and Medicaid programs.
Sucking billions out of the pharmacy supply chain – and taxpayers’ pockets
What has changed dramatically over the decade is that the big insurers are now getting far more of their revenues from taxpayers and the pharmaceutical supply chain as they have moved aggressively into government programs. This is especially true of Humana, Centene, and Molina, which now get, respectively, 85%, 88%, and 94% of their health-plan revenues from government programs.
The two biggest drivers are their fast-growing pharmacy benefit managers (PBMs), the relatively new and little-known middleman between patients and pharmaceutical drug manufacturers, and the privately owned and operated Medicare replacement plans they market as Medicare Advantage.
With the exception of Humana, Centene, and Molina, most of the companies that constitute Big Insurance continue to make substantial amounts of money selling policies and services in what they refer to as their commercial businesses – to individuals, families, and employers – but the seven companies’ commercial revenue grew just 260%, or $176 billion, over 10 years (from $110.4 billion to $287.1 billion). While that’s significant, profitable growth in the commercial sector has become a major challenge for big insurers – so much so that Humana just last week announced it is exiting the employer-sponsored health-insurance marketplace entirely.
The insurers’ commercial businesses have stagnated because small businesses – which employ nearly half of the nation’s workers – are increasingly being priced out of the health insurance market. Most small businesses can no longer afford the premiums. The average premium for an employer-sponsored family plan – not including out-of-pocket requirements – was $22,463 in 2022, up 43% since 2012, which has contributed to the decades-long decline in the percentage of U.S. employers offering coverage to their workers. The percentage of U.S. employers providing some level of health benefits to their workers dropped from 69% to 51% between 1999 and 2022 – including a dramatic 8% decrease last year alone. Growth in this category is largely the result of insurers “stealing market share” from each other or from smaller competitors. As a consequence of this segment’s relative stagnation, PBMs and government programs have become the new cash cows for Big Insurance.
Spectacular PBM Growth
PBM HIGHLIGHTS
Cigna now gets far more revenue from its PBM than from its health plans. CVS gets more revenue from its PBM than from either Aetna’s health plans or its nearly 10,000 retail stores.
UnitedHealth has the biggest share of both the PBM and Medicare markets and, through numerous acquisitions of physician practices, is now the largest U.S. employer of doctors.
PBMs are middlemen companies that manage prescription drug benefitsfor health insurers, Medicare Part D drug plans, employers, and, in some cases, unions. As the Commonwealth Fund has noted:
PBMs have a significant behind-the-scenes impact in determining total drug costs for insurers, shaping patients’ access to medications, and determining how much pharmacies are paid.
The Commonwealth Fund went on to say that PBMs have faced growing scrutiny about their role in rising prescription drug costs and spending. A big reason for the scrutiny – by Congress, state lawmakers and now also by the FTC– is that the biggest PBMs are now owned by Big Insurance. Through mergers and acquisitions in recent years, three of the seven for-profit insurers – Cigna, CVS/Aetna, and UnitedHealth – now control 80% of the U.S. pharmacy benefits market. They determine which drugs will be listed in each of their formularies (lists of drugs they will “cover” based on secret deals they negotiate with pharmaceutical companies) and how much patients will have to pay out of their own pockets at the pharmacy counter – in many cases hundreds or thousands of dollars – before their coverage kicks in. The PBMs also “steer” health-plan enrollees to their preferred or owned pharmacies (and, increasingly, away from independent pharmacists), thereby capturing even more of what we spend on our prescription medications.
Cigna, CVS/Aetna, and UnitedHealth now control 80% of the U.S. PBM market.
Ten years ago, PBMs contributed relatively little to the three companies’ revenues and profits. But since then, the rapid growth of PBMs has transformed all of the companies. The combined revenues from their PBM business units increased 250% between 2012 and 2022, from $196.7 billion to $492.4 billion.
Changes in PBM revenues between 2012 and 2022 for UnitedHealth Group, Cigna, and CVS/Aetna (Editor’s note: Cigna acquired PBM Express Scripts in 2018. To reflect revenue growth, Express Scripts’ pre-acquisition 2012 revenues are included in the Cigna total for that year.)
PBM Profit Generation
The PBM profit growth at the three companies over the past decade was even more dramatic than revenue growth. Collectively, their PBM profits increased 438%, from $6.3 billion in 2012 to $27.6 billion in 2022.
As a result of this fast growth, more than half (52%) of three companies’ profits in 2022 came from their PBM business units: Cigna’s Evernorth, CVS/Aetna’s Caremark, and UnitedHealth’s Optum. Cigna now gets far more revenue and profits from its PBM than from its health plans. And CVS gets more revenue from its PBM than from either Aetna’s health plans or its nearly 10,000 retail stores. (The companies’ business units that include their PBMs have also moved aggressively in recent years into health-care delivery through acquisitions of physician practices, clinics, dialysis centers, and other facilities. Notably, UnitedHealth Group is now the largest U.S. employer of physicians.)
Huge strides in privatizing both Medicare and Medicaid
GOVERNMENT PROGRAMS HIGHLIGHTS
More than 90% of health-plan revenues at three of the companies come from government programs as they continue to privatize both Medicare and Medicaid, through Medicare Advantage in particular.
Enrollment in government-funded programs increased by 261% in 10 years; by contrast commercial enrollment increased by just 10% over the past decade.
Commercial enrollment actually declined at both UnitedHealth and Humana.
85% of Humana’s health-plan members are in government-funded programs; at Centene, it is 88%, and at Molina, it is 94%.
The big insurers now manage most states’ Medicaid programs – and make billions of dollars for shareholders doing so – but most of the insurers have found that selling their privately operated Medicare replacement plans is even more financially rewarding for their shareholders.
Revenue growth from government programs has been dramatic over the past 10 years. (Note the numbers do not include revenue from the Medicare Part D program, federal subsidy payments for many ACA marketplace plan enrollees, or Medicare supplement policies.)
This is especially apparent when you see that the Big Seven’s combined revenues from taxpayer-supported programs grew 500%, from $116.3 billion in 2012 to $577 billion in 2022.
These numbers should be of interest to the Biden administration and members of Congress, many of whom are calling for much greater scrutiny of the Medicare Advantage program. Numerous media and government reports have shown that the federal government is overpaying private insurers billions of dollars a year, largely because of loopholes in laws and regulations that enable them to get more taxpayer dollars by claiming their enrollees are sicker than they really are. The companies also make aggressive use of prior authorization, largely unknown in traditional Medicare, to avoid paying for doctor-ordered care and medications.
In addition to their focus on Medicare and Medicaid, the companies also profit from the generous subsidies the government pays insurers to reduce the premiums they charge individuals and families who do not qualify for either Medicare or Medicaid or who work for an employer that does not offer subsidized coverage. But many people enrolled in those types of plans – primarily through the health insurance “marketplaces” established by the Affordable Care Act – cannot afford the deductibles and other out-of-pocket requirements they must pay before their insurers will begin paying their medical claims.
Dramatic Enrollment Shifts
Changes in health-plan enrollment over the past decade show how dramatic this shift has been. Between 2012 and 2022, enrollment in the companies’ private commercial plans increased by 10%, from 85.1 million in 2012 to 93.8 million in 2022.
By comparison, growth in enrollment in taxpayer-supported government programs increased 261%, from 27 million in 2012 to 70.4 million in 2022.
For-profit insurers dominate the Medicare Advantage market. Note that Anthem mentioned above is now known as Elevance. It owns 14 of the country’s Blue Cross Blue Shield plans.
Within that category, Medicare Advantage enrollment among the Big Seven increased 252%, from 7.8 million in 2012 to 19.7 million in 2022.
Nationwide, enrollment in Medicare Advantage plans increased to 28.4 million in 2022 (and to 30 million this year). That means that the Big Seven for-profit companies control more than 70% of the Medicare Advantage market.
UnitedHealth, Humana, Elevance, and CVS/Aetna have captured most of the Medicare Advantage market since the Affordable Care Act was passed in 2010.
The remaining growth in the government segment occurred in the Medicaid programs that a subset of the Big Seven (UnitedHealth, Elevance, Centene, and Molina in particular) manages for several states.
A few other facts and figures to keep in mind as Big Insurance thrives:
100 million of us – almost one of every three people in this country – now have medical debt.
In 2023, U.S. families can be on the hook for up to $18,200 in out-of-pocket requirements before their coverage kicks in, up 43% since 2014 when it was $12,700.
The Affordable Care Act allows the out-of-pocket maximum to increase annually – 43% since the maximum limit went into effect in 2014.
44% of people in the United States who purchased coverage through the individual market and (ACA) marketplaces were underinsured or functionally uninsured.
42% said they hadproblems paying medical bills or were paying off medical debt.
Half (49%) said they would be unable to pay an unexpected medical bill within 30 days, including 68% of adults with low income, 69% of Black adults, and 63% of Latino/Hispanic adults.
In 2021, about $650 million, or about one-third of all funds raised by GoFundMe, went to medical campaigns. That’s not surprising when you realize that in the United States, even people with insurance all too often feel they have no choice but to beg for money from strangers to get the care they or a loved one needs.
Even as we spend about $4.5 trillion on health care a year, Americans are now dying younger than people in other wealthy countries. Life expectancy in the United States actually decreased by 2.8 years between 2014 and 2021, erasing all gains since 1996, according to the Centers for Disease Control and Prevention.
BOTTOM LINE: The companies that comprise Big Insurance are vastly different from what they were just 10 years ago, but policymakers, regulators, employers, and the media have so far shown scant interest in putting their business practices under the microscope. Changes in federal law, including the Medicare Modernization Act of 2003, which created the lucrative Medicare Advantage market, and the Affordable Care Act of 2010, which gave insurers the green light to increase out-of-pocket requirements annually and restrict access to care in other ways, opened the Treasury and Medicare Trust Fund to Big Insurance. In addition, regulators have allowed almost all of their proposed acquisitions to go forward, which has created the behemoths they are today. CVS/Health is now the 4th largest company on the Fortune 500 list of American companies. UnitedHealth Group is now No. 5 – and all the others are climbing toward the top 10.
Of even greater significance to the insurance industry, though, was a provision of that law that took a languishing private alternative to Medicare–known until 2003 as Medicare+Choice–and began throwing enormous sums of money at private insurers to entice them into participating in what became known as Medicare Advantage plans.
In various ways, the federal government since 2003 has overpaid private insurers hundreds of billions of dollars as an incentive to continue offering those plans. And every year, the federal Center for Medicare and Medicaid Services (CMS) has given those insurers raises, to the point that Medicare Advantage plans–which were touted by many politicians as a way to save taxpayers money–actually cost the government considerably more per enrollee than Traditional Medicare.
This week, CMS announced that private insurers would get one of the biggest raises in the history of the Medicare Advantage program–8.5%. That was even more than the 7.9% increase CMS had previously signaled it would approve and that had triggered outrage among many health care reform advocates and some members of Congress.
As I suspected, the news of that generous pay hike sent the stock price of the biggest Medicare Advantage players soaring yesterday.
Investors were so pleased that yesterday morning they rushed to buy shares of Anthem, Centene, Cigna, Humana, and UnitedHealth Group, all of which are traded on the New York Stock Exchange and all of which are big players in the Medicare Advantage marketplace.
The biggest winner was the biggest Medicare Advantage player of all – and the biggest for-profit insurer – UnitedHealth. United’s stock price hit an all time high of $526.97 yesterday before settling down to close at $517.76 a share. That’s around $500 a share more than what a share of the company’s stock was worth when Congress passed the Medicare Modernization Act in June 2003.
This helps explain why you see so many Joe Namath commercials on TV every fall during the Medicare Advantage open-enrollment period. Insurers spend billions of taxpayer dollars on misleading ads designed to lure as many seniors as possible into their plans.
Last year, the six biggest health insurers made more than $60 billion in profits, fueled in large part by the money they now take in from Uncle Sam. When I reviewed 12 years of those companies’ financial disclosures–going back to 2010 when the Affordable Care Act was signed into law – I found that almost 90% of their collective gains in health plan enrollment came from government programs, primarily Medicare and Medicaid, but mostly Medicare.
It is long past time for members of Congress to start paying attention to how a handful of health insurers are depleting the Medicare Trust Fund in their ongoing quest to make their shareholders happier by making them richer.
(This article was originally published on Tarbell.)
When I was a health insurance communications exec, I was a big part of an ongoing effort–funded by your premium dollars–to get you to believe big myths about the U.S. healthcare system.
Even a minute or two of Googling would have disproved our claims, but we succeeded because we knew most people wouldn’t bother. For the most part, health reform advocates have also not been up to the task of challenging the misinformation and setting the record straight.
Why do my former colleagues keep this deception going? For a single reason: to protect what has become an extraordinarily profitable status for health insurers. As long as you (and the people you vote for) keep believing the myths, you will be parting with far more of your hard-earned dollars than you should to keep insurers’ shareholders happy.
Let’s look at three of those myths.
Myth 1: The U.S. has the best health care system in the world.
While there is no doubt we have some of the very best hospitals, technology, physicians and other caregivers, we are nowhere close to having the best system. My former colleagues and I perpetuated that myth because we wanted you to think that any kind of significant reform is unnecessary, especially if the reform might reduce insurance revenues and profits. We didn’t even want you to think that the millions of Americans without insurance is a big deal because, well, those are just people shirking their individual responsibility by remaining uninsured. In other words, it is their fault, not the system.
In 2004, long before the Affordable Care Act was passed, the Commonwealth Fund launched a major project to assess the performance and fairness of several developed countries’ health systems. Of the 11 systems assessed, ours came in dead last. They have updated the assessments every couple of years, and the top-performing systems have varied over time, but one thing has remained constant: the U.S. continues to bring up the rear–despite the ACA.
The Commonwealth Fund’s most recent assessment, published just this month, found that once again, the United States “trails far behind” other high-income countries on measures of health care affordability, access, administrative efficiency, equity, and outcomes. This is despite the fact that we spend far, far more of our GDP on health care than any other country on the planet.
So yes, we do indeed have some of the world’s best health care providers, but they are off limits to millions of us, because of the fragmented nature of how we pay for care and the administrative burden and costs associated with world-leading inefficiencies on the payer side.
Myth 2: Our employer-based system of health coverage works beautifully, and we can count on it to be there when we need it.
That myth was busted big time last year when we witnessed millions of Americans losing their coverage along with their jobs during the pandemic. The truth is that most people who have employer-sponsored insurance (ESI) are just a layoff or plant closing away from being plunged into the ranks of the uninsured.
The insurance industry and its allies, including the U.S. Chamber of Commerce, which just published a commentary on its website extolling the virtues of ESI, have persuaded politicians on both sides of the aisle to remind us that more than 150 million Americans get their coverage through the workplace. What they don’t tell us is that that number hasn’t increased much at all over the past 20 years while the U.S. population has grown by more than 50 million.
One big reason: fewer than a third of small U.S. businesses now offer coverage to their workers, compared to around half two decades ago. The average family policy through an employer has increased to more than $21,000 a year, according to the Kaiser Family Foundation, and the cost of insurance has gotten so high that more and more small employers are throwing in the towel.
Even our biggest employers are now realizing that the cost of providing coverage to their workers is out of control. An astonishing 87% of the top executives of America’s largest companies say the cost of providing health insurance will become unsustainable for them in the next five to ten years, according to a survey conducted earlier this year by the Kaiser Family Foundation and the Purchaser Business Group on Health.
Myth 3: Health insurers are appropriate and efficient gatekeepers to healthcare.
Under the pretense of reducing unnecessary and inappropriate care, insurers began making providers get approval from them in advance before treating people enrolled in their health plans. But by putting increasingly aggressive prior authorization requirements in place, these policies also reduce access to care that is both necessary and appropriate, and insurers avoid paying an untold number of claims.
Insurers have become so aggressive that one in four doctors say prior authorizations requirements have caused “serious adverse events” for their patients and in more than a few instances have contributed to premature patient deaths (according to the American Medical Association).
Insurers have succeeded in persuading employers and policymakers that these prior authorization requirements save money, but there is little evidence to support that. In fact, prior authorization demands add considerably to the high administrative expenses the Commonwealth Fund and other researchers note are unique to the U.S. healthcare system.
Ultimately, these myths serve to preserve the status quo. Insurers continue to bring in record profits, by making care harder to access. Perpetuating these myths are central to deflecting criticism and avoiding reform.
